The Chinese economy has been growing steadily for decades. The majority of Chinese exports go to the United States, mostly raw materials for the production of finished products. The aim of this paper is to present the economic development of China and its exchange rate system. The undervaluation of the Chinese yuan allows the US to increase consumption due to better trade conditions. China is the world's largest exporter of goods and the fifth largest exporter of commercial services. By joining the WTO, China has greatly contributed to world economic and trade growth. China has been an important partner to the United States for importing its products, while China has benefited the United States from repaying its own debts. In December 2015, the IMF granted the yuan reserve currency status, making it the world's fourth most widely used currency. The second part of the paper describes in detail the development of China's exchange rate policy during the last few decades of the 20th century and the beginning of the 21st century. China's exchange rate policy has affected the United States, but also the global market. The exchange rate of the yuan against the dollar varied and affected trade and cooperation between China and the United States. Due to the increasing competitiveness of Chinese exports, the Chinese yuan was devalued during the transition from a planned to a market economy. Exchange rate policy is a very important segment of monetary policy. China has fixed its exchange rate at an overvalued level to reduce its dependence on manufactured goods.